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Author: 


Frame,  Andrew  Jay 


Title: 


Address  by  Andrew  Jay 
Frame 

[Waukesha?  Wis.] 

Date: 

[1913] 


RESTRICTIONS  ON  USE: 


FILM  SIZE:      ^tf^^M 


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BUStMESS 

D730.73 
F855 


Frame,  Andrew  Jay,  1844-  1S32. 

...  Address  by  Andrew  Jay  Frame  ...  entitled,  Facts 
vs.  fallacies  in  banking  reform,  delivered  before  the  State 
bankers  association  at  Muskogee,  Oklahoma,  May  9th, 
1913.     [AVaukesha?  Wis.,  1913] 

cover-title,  11,  ill  p.    2U"". 


1.    Banks    and   banking— U.    S.    2.    Panics.    3.    Banks    and   banking- 
Canada. 

15-23994 


Library  of  Congress 
Copy  2. 


HG2481.F76 


TECHNICAL  MICROFORM  DATA 


REDUCTION  RATIO:       |2:  1 


IMAGE  PLACEMENT:  lA  CHA)  IB      ilB 


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PURCHASED  BY  THE  UNIVERSITY 
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ADDRESS  BY 


Andife^^v^   Jay  JPrame 

President  of  the  Waukesha  National  Bank 
Waukesha,   Wisconsin 


ENTITLED 

Facts    vs.   Fallacieis 
In  Banking  Ref  orat 


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DELIVERED  BEFORE  * 

THE  STATE  BANKERS  ASSOCIATION 

AT  MUSKCXIEE.  OKLAHOMA 
MAY  9th.  1913— — - 


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READ    AND    PONDER 

"Truth  crushed  to  earth  will  rise  again."  The  following  are  a 
few  pungent  comments  on  the  address.      The  Oklahoma  Banker  says: 

"Andrew  Jay  Frame's  address  on  Friday  morning  was  the  great 
talked  of  feature  of  the  conviention.  His  characterisation  of  the 
Canadian  system  as  one  under  which  the  "cream  was  skimmed"  and 
sent  to  the  big  centers,  while  the  local  bankers  gave  their  com- 
munities no  aid  or  support  worth  speaking  of  seemed  to  aptly  fit 
the  case  and  made  a  deep  impression  on  the  audience.  When  he 
ceased  to  speak  the  much  heralded  Canadian  and  allied  systems  were 
m  exceeding  disrepute  with  the  bankers  of  this  state,"  etc. 

The  Times  Democrat,     Muskogee,  says: 

"One  of  the  big  features  of  Friday's  convention  session  of  the 
Oklahoma  Bankers'  Association  was  the  address  of  Andrew  Jay 
Frame"  etc.  Then  follows  a  digest  of  nearly  three  columns  taken 
from  the  address. 

The  Daily  Eagle,  of  Enid,  Oklahoma,  says: 
"Mr.  Frame  was  the  leading  attraction  at  the  convention  of  the 
Oklahoma  Bankers'  Association  in  Muskogee  last  week,  and  delivered 
an  address  there  which  officers  and  memhers  of  the  Association  be- 
lieve to  be  the  most  elucidating  and  meritorious  of  any  address  yet 
delivered  to  Oklahoma  bankers,"  etc. 

The  Morning  NeVs:  .cffT  ^ntd;  cjnflrm^  in.  similar  language. 
The   Editor-in-Ch1fei.:o£;.-t!i|.*j\jV)^t..Warld    and    Chronicle     of 
New  York  City,  wJiich.pubJishpd-atter  Jl^e  .edi^orial-the  address  in 
full  as  the  leading •artif;lQ,.Saysj    »:  '.  J  ::.*::    : 

•    »*••*».,  i    V    *  •  •  •  •    . 
"I^  my  opinion  th^  gr^^ter  number  Vf  thinking  people  who  read 
the  address,  the   betteV/  -li:  i^e^m'§rm;b^  ope  of  the   most  valuable 
contributions  yet  made-  to  thV  SM'blwt;  hi  -so-called  'banking  reform' 
in  this  country." 

Further  quotations  seem  superfluous. 


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SOME  FACTS  VS.  FALLACIES 
IN  BANKING   REFORM 


(Ireat  I5iilaiii.  in  her  campaign  of  education  on  currency  re- 
form was  agiUitcd  l.v  widr-sDread  discussion  for  twenty-five  years 
In-Lvious  to  ISU;  when  Parliament  eiidorsed  the  celebrated  -Bullion 
RcDort   of    1810   to   the    House  of   Commons.  .  .  ^, 

!>,of    William  Cr.   Sumner  in  his  -History  of  American  Currency 
dubs    (his    report    "The    most    important    document    in    financial    liter- 

''^"'as   to   ameliorating.'    panic   conditions,  the   paramount    enunciation 
in  that  document   probably  was  'in  the  presence  ot  a  panic,  it  ..-,  tne 
luty   of     he   bank    to  discount   freely   to  all    solvent   parties.        I   c^n- 
o  'find   iu   searchin.g   the   records  that   this  document  -dvoca t^es     he 
necessity   of   discounting   too   freely    in   normal   times.      That   question 
must    lecessailv    be    governed    automatically    by    the   law    of    supply 
an"  demand  for- luoney.     Abnormally  high  ;"J-.-«t/ates  are  the  true 
barometer    that    credit    expansion     has     outstripped     capita      and      n 
normal    times,    even    in    advancing    prosperity,    ^l^ould    be    '^^l^^^^ 
that    extra    currency    issues,     which     Prot.     Suinner  ,  ^j^^,.  f,;^'  "^ 
capital',    should    not    be    greatly    encouraged.    ^  The     ate    J    ;  "'    ^^  ^^f 
aster   is   a   fair   illustration    of   my    meaning.     Dr.    Adam    Smith    said. 
"The  cry  of  all   ages   is  for   more 
age  is  more  speed  in  every   way. 
a   check  rein  to  ensure  a  conserval 
prosperity     to    all,    thus    limiting 
npriods  as   well   as  their  severity.  ^.     ,      #     ^ 

*  dc«clar^    that    no   live,   progressive   nation   can   be   entirely    tree 

from  panics      Oulv  those   nations  where   commerce  and   progress  aie 
deul    can    enjoy    the    doubtful    legacy.      l>anics    will    forever    be    with 
lose  natious'enjoying  great  progress,  expanded  ^^J^^.^"^ 
onofjrv       The«e    reign    here.      I    plead    tor    conservatism    as    a   saiei> 
alve    to   trie    permanent    progress   and    relief   when    panic-   threatens. 
ITiidei    Sir    Robert    Peel's   Act   of   1844,  Great    Britain   has  a   very 
limited    per      apita    circulation,    and    it    is    far    moiv    rigid    than    ouis. 
Never?he^^^      in    1S47,   1S.57   and   18.;r,,    when   panics   were   raging    and 
.u  ks    md    hus  ness   houses    were    falling    like    snow    in    a    winters 
sun^.  'Im    gol'l'n^ilr  assurance   that    the    ^^^^^^J^^IZ 
unuld    not    be   enforced,    the    Governor  ot    the   Bank   ot    bngiana    .»iu) 
X   arou.K-ed"hat   ail    good,   solvent   bankers  -^^   merchants  cojUd 
obtain,   at   high   rates,  discounts  tor  cash   or   ^-^'^^Ij^  at   the   B^nk    t  e 
Banking    Department,  merely    obtaining    extra    cash    tiom    the    ihsne 


money."  The  cry  of  the  present 
The  overbuoyant  American  needs 
ism  which  gives  more  permanent 
the    evils    of    too    frequent     panic 


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INTENTIONAL  SECOND  EXPOSURE 


L'».V'-'v'.   f" 


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/-^' 


READ   AND    PONDER — 

"Truth  crushed  to  earth  will  rise  again."  The  following  are  a 
few  pungent  commits  on  the  address.      The  Oklahoma  Banker  says: 

"Andrew  Jay  Frame's  address  on  Friday  morning  was  the  great 
talked  of  feature  of  the  conviention.  His  characterization  of  the 
Canadian  system  as  one  under  which  the  "cream  was  skimmed"  and 
sent  to  the  big  centers,  while  the  local  bankers  gave  their  com- 
munlties  no  aid  or  support  worth  speaking  of  seemed  to  aptly  fit 
the  case  and  made  a  deep  impression  on  the  audience.  When  he 
ceased  to  speak  the  much  heralded  Canadian  and  allied  systems  were 
in  exceeding  disrepute  with  the  bankers  of  this  state,"  etc. 

The  Times  Democrat,     Muiskogee,  says: 

"One  of  the  big  features  of  Friday's  convention  session  of  the 
Oklahoma  Bankers'  Association  was  the  address  of  Andrew  Jay 
Frame"  etc.  Then  follows  a  digest  of  nearly  three  columns  taken 
from  the  address. 

The  Daily  Eagle,  of  Enid,  Oklahoma,  says: 
"Mr.  Frame  was  the  leading  attraction  at  the  convention  of  the 
Oklahoma  Bankers'  Association  in  Muskogee  last  week,  and  delivered 
an  address  there  which  officers  and  members  of  the  Association  be- 
lieve to  be  the  most  elucidating  and  meritorious  of  any  address  yet 
delivered  to  Oklahoma  bankers,"  etc. 

The  Morning  NeVs:  f«  ?Dtd:  cenflf  m^  in.  similar  language. 
The   EditoT-in.C1flfeLifi;:tlie -J^^JJ^t.-WQ^ld    and    Chronicle     of 
New  York  City,  wJilch.pubJished— atter.  fl^e  .edit^orial— the  address  in 
full  as  the  leading -Artlpl^, . Say g;    •.*  '.  .*  :  :.':  :   : 

"In(  my  opinion  th^  gr^^ter  number  of  thinking  people  who  read 
the  address,  the  betteV."  hc  tf^m*§rta:b^  ope  of  the  most  valuable 
contributions  yet  made**  to*  the*  siibseot:  hi  .^called  'banking  reform' 
in  this  country." 

Further  quotations  seem  superfluous. 


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SOME  FACTS  VS.  FALLACIES 
IN  BANKING   REFORM 


Great  Britain  in  her  cami)algn  of  education  on  currency  re- 
form w  is  agitated  by  wide-spread  discussion  for  twenty-five  years 
preTior?o  Tsle  when  Parliament  endorsed  the  celebrated  "Bullion 
Rpnnrt   of   1810   to   the  House  of  Commons." 

^Prot    William  G-.  Sumner  in  his  "History  of  American  Currency 
dubs    this    report   "The    most   important    document   in   financial   liter- 

^^"'as   to  ameliorating   panic  conditions,  the  Pa^'%"^^"^*  f.^^.f  .^'^^J2^ 
in  that  document  probably  was  "In  the  P^^^^JJ,*?^^^^.  ^Jf.^^^/'  i%an- 
duty  of  the  bank  to  discount  freely  to  all   solvent  parties.       i  caji 
no^find  in   searching  the   records  that  this  document  ^f  ^<^^t^^«^^  ^^^ 
necessity  of  discounting  too  freely  in  normal  times.     That  question 
must    necessadly    be    governed    automatically    by    the   law    of   supply 
and  demand  tor  money.     Abnormally  high  interest  rates  are  the  true 
ba?omeTeT'tha[  credit   expansion    has     outstripped     capital    ^nd     in 
normal    times,    even    in    advancing    prosperity,    should    be    a  jva  mng 
that   extra   currency    issues,    which     Prof.     Suniner  .  ^.^"%..f^^j^.^^X 
capital",   should    not    be    greatly   encouraged.      The    late   Jitani.     d^s 
aster  is   a  fair   illustration   of  my    meaning.     Dr^   Adam   S^jth   said 
"The  crv  of  all   ages   is  for   more  money.       The   ciy   ot   ine   preseu.. 
ale  is  mo?e  speed  in  every  way.     The  overbuoyant  American  needs 
fchLck  re?n  t^  ensure  a  /onservatism   which  f  v-   m.^/^^^^p^/^  J 
prosperity    to    all,    thus    limiting    the    evils    of    too    frequent    panic 

periods  as   well  as  their  severity,  ,•        ^„„    k«   ^ntirplv   free 

T   declare   that   no  live,  progressive  nation   can   be  entirely    nee 

from  nanks      OiiTv  those  nations  where   commerce  and   progress  are 

dea^    can   enjoy    the    doubtful    legacy.      Panics    will    forever   be    with 

fl^'s'e  naUons^enjoying  great  P-^---  -P^^Xe^'aUsm   a^  a"ety 
^«o^<rv       Thpsp    reien    here.      1    plead    tor   conseivatism   as    a   baiei> 
v«We   io   uuepemfanent   progress   and   relief   when    panic   threatens, 
kderstr   R^eil   Peers   Act  of  1844,  Great  Britain  has  a   very 
limited   per   capita    circuhu\on,   and   it   is   far   more    rigid   than    ours 
Nevertheless    in  1847,  1857  and  1866,   when  panics  were  laging^  and 
banks   and   business   houses   were    falling    like    snow    m    a  .winters 
storm     on    -ovenment   assurance   that    the   rigid   currency     imitation 
would  not  be  enfo  ced    the   Governor  of  the  Bank  of  Englaud  pub- 
c'ly  anTouncel  th"t  ail   good,   solvent  bankers  ^^^^^  -^  Bank'The 
obtain    at  high   rates,  discounts  for  cash  or  credit  at  the  Bank,  tne 
BaSg    Department!  merely    obtaining    extra    cash    from    the    issue 


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department,  on  deposit  with  it  of  ample  securities.  The  mere  knowl- 
edge that  relief  was  at  hand,  history  says,  broke  the  back  of  the 
panic  almost  in  the  twinkling  of  an  eye,  and  little  "extra  cash"  was 
required  to  restore  confidence.  Mark  the  fact,  relief  came  with 
"extra  cash"  at  high  interest  rates,  and  such  cash  was  almost  im- 
mediately  retired  and  normal  conditions   prevailed   thereafter. 

As  our  general  banking  functions  in  most  material  respects  under 
the  beneficent,  independent  banking  systems  of  the  United  States, 
barring  a  few  states  without  good  laws,  now  fulfill  their  true  mis- 
sion toward  the  people  in  our  phenomenal  progress,  it  seems  the 
only  needful  requirement  is  some  flexibility  to  our  currency  issues 
when  panic  threatens,  to  the  end  that  general  paralysis  of  trade  and 
commerce   may   be    avoided. 

To  accomplish  this  great  end,  we  need  no  monopolistic,  branch 
banking  system  thai  even  threatens  to  revolutionize  present  con- 
ditions; we  need  in  normal  times  no  further  inflation  of  our  present 
excessive  currency  issues;  we  need  no  additional  easy  methods  of 
expanding  credit  by  acceptances  or  otherwise,  but  as  I  have  often 
said  before,  we  do  need  some  method  of  obtaining  rediscounts  in 
abnormal  periods  from  some  reservoir  of  extra  cash,  at  high  interest 
rates,  purely  as  a  relief  maeasure  to  prevent  the  calamitous  condi- 
tions of  general  cash  suspension  by  banks.  The  citation  froni  ex- 
perience, not  theory,  of  the  Bank  of  England  covers  the  point  at 
issue,  except  that  the  barometer  of  a  high  interest  rate  for  extra 
cash  should  be  an  automatic  regulator  of  flexibility,  and  the  bank 
should  not  bo  obliged  to  ask  the  Government  not  to  prosecute  for 
infringement  of  law  for  relief  in  time  of  trouble.  The  Chairman  of 
the  Monetarv  Commission  told  me  he  asked  the  Governor  of  the 
Bank  of  England  why  the  government  did  not  give  this  extraordinary 
power  to  the  Bank  for  relief  in  troublous  times,  and  his  answer  was, 
"We  fear  over-expansion  of  credit."  My  study  of  the  subject,  how- 
ever, convinces  me  that  a  middle  ground  between  the 
Currency  system  on  one  hand  and  on  the  other  hand 
of  the  banking  reform  ^advocates  for  almost  unlimited, 
rency  issues,  even  in  normal  times;  also  for  monopolistic,  revolution- 
ary, complex  and  compound  remedies  at  all  times  which  are  not 
germane  to  relief  under  pressure,  holds  the  true  solution  for  our 
troubles.  Doping  patients  with  sweetened  quack  medicine,  when  they 
are  not  ill,  undermines  a  sound  constitution.  Encouraging  pyramid- 
ing of  crerlit  by  opening  up  easy  methods  for  expansion  leads  to 
bubble  Mowing.  It  is  a,  panic  breeder  and  not  a  preventer.  The 
— ThTpenal  Bank  of  Germany  comes  closer  to  covering  the  correct 
method  of  relief,  as  it  can  issue  but  130  millions  of  uncovered  cur- 
rency, and  all  in  excess  thereof  must  pay  a  tax  of 
the  government.  This  penalizes  over-expansion  of 
is  the  safety  valve  which  has  kept  her  over-strained 
exploding.  Even  this  method  has  taxed  her  utmost 
vent  a  cataclysm  there,  as  is  evidenced  by  the  German  banks  bor- 
rowing money  of  the  United  States  banks  on  good  collateral  at  rates 
running  from  5  to  (5%  clear  through  1911-11)12  and  even  up  to  date. 
The  banks  of  Germany  even  bid  20%  for  money  in  the  New  York 
market  in  December.  1911,  and  at  several  periods  since  have  bid 
in  excess  of  6%.  Notwithstanding  her  5%  penalized  flexible  cur- 
rency saved  hei-  from  panic,  yet  (Jermaiiy  has  bordered  thereon  for 
some  time,  chiefly  because  of  over-indulgence  in  acceptances,  which 
are  more  freely  granted  there  than  elsewhere,  coupled  wiMi  an 
enthusiastic   industrial  development,   over-taxing  her   surplus   cai.ital. 

2 


rigid  English 
the  demands 
untaxed   cur- 


5%    thereof     to 

currency    and 

condition   from 

powers   to    pre- 


HANDWRITING    UPON   THE   WALL. 

Just  a  few   more   words  of  warning  on   over-expansion   of  credit 

?n'r89o\hr'otarwealth  of  the  U.   S^  was  about. ..  .|  65,000  rnillions 

In  1913  the  total  wealth  has    about    doubled,    or 130,000  millions 

The   banking   power    of    the   United    States:  ^^^^  millions 

In  1890  was 2o'oo0  millions 

In  1913  it  is  five  times  as  great,  or •  •  •  •  •/^'"""  "l\  *;Vit« 

therefore,    while   our   wealth    doubled,    our   pyramid   of   bank    ci  edits 

increased   five-fold. 

Aeain     the    1912    Report   of    the     Comt)troller    of  the     ^uirency 

shows^''Toans  and   discounts"   including   bonds,   of  all  the  banks  in 

the  United   States   about   as   follows:  millions 

In  various  classes  of  bonds  (not  government) $  4,500  JJJ|{j!OJJs 

Loans  on  real   estate,  say • c'aaa  TniiUnn** 

General  loans,  not  quickly  liquidated 6,000  m      ons 

Prime  paper,  including  bills  of  lading. •  ^'^^^^  mihions 

Total ^^ .-• $18,500  millions 

This  indicates  that  only  one-fourth  of  the  total  is  l^^j"]?  P^per   ^^^^ 
thP  other  three-fourths  is  in  other  Securities,  because  all  live  paper  is 
now    )rrmDtlv  cared  for  first.     The  heretical  demand  by  the  banking 
fZr^Z^c^^t  7,400  national  banks  ^o  be  allowed  to  lo^ 
credit  to  their  customers  on  acceptances,  which  is  clearlv   a  compiica 

tion  and  not  a  relief  of  banks  in  panic  P^^io^^^^  .^^^^.^^^^'^ned 
twelve   bankers    from   twelve    states   in    a    signed    brief   which    I    .ilea 

at  Washington  with  the  Banking  and  Currency  Committee.  These 
twelve  bankers  declare  that  if  their  city  correspondents  enter  the 
field  of  accepting  customers'  drafts,  they  will  transfer  their  balances 
?o  more  conservative  banks.  They  declare  this  func  ion  is  the  field 
for  acceptance  or  discount  houses,  and  not   for  banks  of  deposit. 

It  is  gratifying  to  note  that  altho  a  year  ago,  when,  under  the 
title  of  "Diagnosis  of  the  Monetary  Comlmission  Bill"  I  addressed 
the  Bankers  and  Business  Men's  clubs  of  Memphis.  Tenn  Little 
Rock  Ark  ,  and  elsewhere,  and  therein  condemned  general  bank  ac- 
ceptances as  unsafe,  lately  the  chairman  of  the  "Busmess  '.en  s 
I  eaeue  of  the  U.  S."  reiterated  my  expression  that  '  it  was  a  daiiger- 
01?;  proposition".  Let  there  be  more  light  and  the  whole  question 
may  be  soundly  solved  yet  without  breaking  all  the  crockery, 
in  face  of  the  fact  that  the  world's   production  ot  gold   from     490 

to   1890-400   years-was 57,3o0  m      ons 

and  from  1890  to  1913—23  years— was •  •  •  •    '"".''  "^,y'^;^"^ 

in  face  of  the  fact,  that  the  pages  of  history  are  strewn  with  proofs, 
as  recorded  by  all  the  great  authorities  on  political  economy  vvarn- 
ing  us  against  over-indulgence  in  credit  expansion;  in  face  o.  the 
fart  thit  Dractically  all  our  conservative  banking  journals  and  eco- 
nomic^Tifers  on  The  great  daiilies  are  continually  sounding  heir 
no^s  of  warning    (time  forbids  quoting   from   a   mass   of  evidence 

"n  tlce  of  the  fa^ct,\hat  the  world's  greatest  ^-^^ll^'K^Z^^^T'.^^^^^ 
LeRov  Beaulieu.  of  Paris.  France,  lately  declared  that  the  a  hole 
ivnrld'^  nvramid  of  credit  was  over-expanded,"  I  ask  in  all  seriousuess 
Ts  not  t^'handwrit^fg  upon  the  wall"  a  sufficient  warning  to  us 
Iha  conservatism-not  further  easy  methods  of  expanding  our  cur- 
rency  o"  credit-should  reign  supreme?  I  challenge  any  banker  or 
statesman  for  disproof  of  these  facts. 

wTthout  further  pursuit  of  this  subject  and  as  the  new  political  pow- 

o 


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A 


er  is  wrestling  with    the    generally  supposed    knotty  problem,    let  us 
await  the  findings  in  hope  of  a  sound  solution. 

Permit,  therefore,  a  few  logical,  general  statements  of  fact,  good  in 
any  event,  followed  by  a  few  of  the  many  reasons  why  the 
independent  banking  system  of  the  United  States  is  not  the  worst, 
but  the  best  in  the  world, — barring  only  relief  in  times  of  pressure, — 
in  the  hope  that  it  may  help  enlighten  our  pathway. 

Panics  Abroad  and   Here. 

First  permit,  regretfully,  a  reference  to  statements  that  have  per- 
iodically been  sent  broadcast  throughout  the  land,  which  are  so  ser- 
iously misleading  that  they  ought  not  to  pass  without  comment. 

Within  two  years  I  have  heard  Hon.  Robert  W.  Bonynge,  a  meniuer 
of  the  Monetary  Commission,  in  public  addresses  reiterate  the  fol- 
lowing— 

"It  miay  be  several  years  yet  before  the  country  will  be 
ready   for  a   full   and   scientific    remodeling  of  our  anti- 
quated banking  system."     "Our  faulty  banking  system  is 
responsible  for  the  many  bank  panics  that  have  disgraced 
us  in  the  past,  and  from  which  all  other  great  commercial 
nations  have    been  exempt  for  practically  half  a  century." 
David  R.  Forgan,  President  National  City  Bank  of  Chi- 
cago, before  the  New  York  Credit  Men's  Association,  Jan- 
uary  23rd,   1913,    (see   page   4,   pamphlet   "How   to  Avoid 
Panics"),  said:    "I  say  it  is  nothing  short  of  a  national 
disgrace   that   this   is   the   only    country    in    the   civilized 
world  that  has  had  panics   (and  it  has  had  about  half  a 
dozen)   causing  general  suspension  of  the  banks,   within 
the  memory  of  living  man." 
The  Chamber  of  Commerce  of  the  U.  S.  of  America,  at  Washington, 
D.  C,  January  21,  22,  23,  1913,  adopted  the  following  resolutions: 
"Our  present  banking  and  currency  system  based  upon 
laws  enacted  fifty  years  ago  is  entirely  inadequate  for  the 
present  needs  of  the  people  and  the  business  interests  of 
the  country  on  which  the  welfare  of  our  people  depends." 
"That  there  is  no  necessity  for  the  continuance  of  this 
condition   in  the  United  States,  and  for  the  recurring  fi- 
nancial panics  it  tends  to  induce,  is  evidenced  by  the  ab- 
sence   of  such   frequent   financial    disturbances    in    other 
countries." 
These  with   others  of  a  like   character  seem  to  have  imbued   the 
masses  with  the  idea  that  panics  do  not  occur  abroad.     Some  stress 
is  laid   upon   a  fine  distinction   between  the  words   "bank"  and  "com- 
mercial" panic.     The  Standard  dictionary  indicates  a  distinction  like 
unto    tweedleum    and    tweedledee.      As    to    the    business    men    of   the 
Chamber  of  Commerce  falling  into  error  on  the   subject,   it  may  be 
excusable,   because   it    is  not   to  be  expected   that   they  are   familiar 
with   the   world's   history   on   banking. 

As  a  partial  answer  to  these  fallacious  statements  permit  me  to 
quote  from  my  adddress  of  1902  before  the  State  Bankers'  Associa- 
tion  of   Michigan. 

Panic  of  1836  to  1839. 

Sumner's  Hffstory  of  American  (Airrency  says.  "In  1836,  the  Agri- 
cultural Bank  of  Ireland  and  the  Northern  and  Central  Bank  of  Man- 
chester failed."  They  had  70  or  80  branches.  "This  was  the  first 
blow  of  the  crisis  whish  convulsed  Europe  and  America."    According 

4 


fi 


t 


to  McLeod,  failures   continued  through   1839  before   equilibrium  was 
restored. 

Panic  of  1847. 

McLeod,  in  "The  Hjistory  of  Banking  in  All  Nations."  quotes  many 
great  bank  failures  in  1847  all  over  Britain  and  sums  up  by  saymg 
the  liabilities  were  over  £15,000,000.  Further,  it  says,  "A  complete 
cessation  of  private  discounts  followed."  Doubtless  branch  banks 
went  down,  but  no  distinction  is  noted. 

Panic  of  1857. 

Again  McLeod  quotes  a  long  list  of  terrible  bank  failures  in  1857. 
and  then  says,  "As  the  failures  in  London  became  more  tremendous, 
discounts  became  more  and  more  contracted.  The  stunning  news  of 
the  stoppage  of  so  many  banks  created  a  banking  panic.  Private 
banks  stopped  discounting  altogether.  When  universal  rum  was  at 
last  impending,  etc."  "This  great  crisis  far  exceeded  in  mtensity  that 
of  1847  "  The  aggregate  liabilities  must  have  been  appallmg,  but  are 
not  stated  Mr.  Sticknev,  in  his  American  Bankers' Association  address 
stated  that  "In  1837  and  1838,  also  in  1856,  there  was  a  great  com- 
mercial crisis  in  Great  Britain,  but  not  a  bank  in  England  or  Scot- 
land failed."  As  I  can  find  no  record  of  a  crisis  in  1856,  must  we 
not  conclude  that  this  date  is  erroneous  and  comment  as  to  failures 
would  b0  uncharitable. 

Panic  of  1866. 

In  1866,  according  to  McLeod,  at  the  time  Overend,  Gurney  & 
Co  failed  for  £10,000,000,  the  bank  failures  of  Great  Britain  aggre- 
gated the  stupendous  sum  of  £50,000,000.  This  sum  exceeds  the 
total  liabilities  of  all  the  failed  National  Banks  of  the  United  States 
since  their  inception  forty  years  ago,  to  this  date,  by  over  £13,000.000. 

Panic  of  1878. 

In  1878  the  West  of  Eligland  and  South  Wales  Banking  Co. 
failed  for  £5.000,000,  with  forty  or  fifty  branches.  In  the  same  year 
the  City  of  Glasgow  Bank  failed  for  £14,000,000,  with  131  branches. 
These  with  other  bank  failures  carried  the  liabilities  to  over  £20,- 
000,000.  The  American  Encyclopedia  says,  "The  year  1878  was 
marked  by  deepening  financial  gloom  in  England,  aggravated  by 
disastrous  financial  failures,  and  the  City  of  Glasgow  Bank  failure 
amounted  to  almost  a  national  disaster." 

Panic  of  1890. 

McLeod  quotes  the  failure  of  the  Barings  in  1890  for  £21,000.000. 
but  for  fear  of  a  general  upheaval  the  great  banks  of  Britain  joined 
together  and  liquidated  the  Barings,  thus  limiting  the  disaster  ma- 
terially, although  other  failures  occurred. 

Hearers,  are  you  tired?  I  wonder  sometimes  what  "standard 
authorities" '  Mr.  Stickney  studied  when,  at  the  American  Bankers' 
Association  last  fall,  he  drew  such  a  lovely  picture  of  the  magnificent 
banking  system  of  Great  Britain,  which  we,  with  "no  system,"  ought 
to   adopt   to   prevent    panics    and   to   become  the   creditor   nation   of 

the  world!  . 

Let  us  look  for  a  moment  at  the  panics  in  the  United  States. 

5 


tv: 


<a,jw"im!iiiu,j_ij-iii« 


Panic  of  1836. 

FYom  1836  to  1839  history  would  indicate  that  we,  in  consequence 
of  the  bank  war,  speculation,  etc..  were  in  bad  straits  as  well  as 
Britain. 

Panic  of  1857. 

In  1857,  on  account  of  wild  cat  banking  enjoying  its  widest 
freedom,  we  have  no  cause  for  claiming  more  than  parallel  condi- 
tions compared   with   those  of  Britain. 

Panic  of  1873. 

In^  1873,  on  account  of  return  to  normal  values  after  the  inliated 
prices  produced  by  cheap  money  during  the  suspension  of  specie 
payments  on  account  of  the  Civil  War,  we  had  a  panic,  but  as  to 
severity  it  did  not  compare  with  the  cyclonic  conditions  that  struck 
terror  to  Great  Britain   in  1866. 

Panic  of  1893. 

In  1893  we  had  a  panic  in  the  United  States.  Not  because  of 
any  special  unsoundness  in  the  banks  of  this  country,  but  because 
the  very  foundation  of  the  superstructure  of  our  whole  credit  sys- 
tem was  being  undermined  in  an  effort  on  the  part  of  repudiators 
—  thank  God,  not  bankers — to  pay  off  depositors  and  all  other  credit- 
ors in  50-cemt  dollars,  and  to  liquidate  our  foreign  debts  by  the 
same  dishonorable  method,  thus  aggravating  panic  conditions  by  the 
withdrawal  by  creditors  abroad  bn  account  of  fright  in  the  first  five 
months  of  the  year  of  $70,000,000  from  our  stock  of  gold.  If  busi- 
ness paralysis  is  not  certain  on  an  occasion  when  general  repudia- 
tion and  dishonor  is  rampant,  then  history  falsifies  the  rf3^ord. 
Confidence   builds   up,   distrust    paralyzes. 

Let  us  sum  up  the  panic  records  as  to  liabilities  of  failed  ba-tks — 

Great  Britain. 

1836  to    1839    liabilities No  n^cord 

1847  liabilities  Over   £   1 5.000,000 

1857  liabilities — No  record  except  "far  greater  than  in  1847" 

1866  liabilities    £   50,000.000 

1878  liabilities    Over     20,000,000 

1890  liabilities    Over     21 ,000,000 

In  less  than  sixty  years  aggregate  recorded £106,0tH),000 

With  1836  and  1857  not  recorded. 

United   Sstates    (in    £) 

1836  to    1839    liabilities Not  recorded 

1857  liabilities    Not  reco.  ded 

(Call   conditions    parallel    to  those  of  Great  Britain) 

1873  liabilities  of  national  banks    £   2,200,000 

1873  liabilities  of  all  other  banks  No  record 

1893  liabilities  of  national  banks    £   6,000.000 

1893  liabilities  of  all  banks    14,800,000 

It  will  readily  be  seen  that  Britain  has  six  recorded  panic  dates 
as  against  four  in  the  United  States  in  the  past  sixty  years,  and  that 
the  recorded  liabilities  are  over  £106,000,000  in  Britain  and  but  a 
small  fraction  of  that  sum  in  the  United  States. 

6 


k 


I 


According  to  the  1901  report  of  the  Ojmptroller  of  the  Currency, 

the  total  liabilities,  x>Q7ftftnnnn 

1863  to  1901  of  failed    national   banks    was ^.I'Saaa 

1863  to  1896  of  all  other  banks  in  United  States 44,000,000 

Makinga  total  of £81,000.000 

This  is  £10,000,000  short  of  the  liabilities  of  the  banks  of  Great 
Britain  in  the  panics  of  1866,  1878  and  1890  alone,  not  counting  a 
single  intermediate  failure  in  the  past  forty  years.  When  we  come 
to  compare  historical  facts  with  unsupported  assertion,  the  bank- 
ing system  of  the  United  States  looms  up  so  grandly  that  every 
American  should  feel  proud.  I  know  you  will  pardon  me  if  I  refer 
to  one  more  bit  of  history,  the  Australian,  which  is  an  offshoot  of 
Great  Britain's  branch  banking  system.  The  American  Encyclo- 
pedia for  1893  says  "Out  of  twenty-eight  banks  with  1,700  brauches, 
thirteen  of  them  with  800  or  900  branches  failed  in  six  months  end- 
ing May  1893,  for  the  stupendous  sum  of  £90,000,000,"  which  sum 
in  that"  single  swoop  exceeds  the  total  liabilities  of  all  the  failed 
banks  in  the  United  States  in  the  past  forty  yaers.  although  the 
banking  power  of  the  United  States  was  six  times  that  of  Australia 
at  that  time.  What  is  the  cause  of  the  financial  distress  in  Ger- 
many for  the  past  few  years?  She  has  had  a  branch  banking  system, 
too. 

I  say  "Why  do  these  people  insist  on  reiterating  such  fallacies?" 
I  leave  the  answer  to  my  hearers. 

Here  is  another  that  makes  a  country  banker  smile.  An  eminent 
branch  bank  advocate  openly  declared  in  public  lately.  "It  is  the 
country   banker  that  causes  a  panic,  and  only   the  country   banker. 

As  an  answer  I  will  simply  ask:  "Did  the  panic  of  1907  crigi- 
nate  in   New   York    City?      If   not,    where   did    it   incubate?" 

"Did   'the   country   banker'   cause  it?" 

"Would  the  banks  of  the  country,  as  a  whole,  have  suspended 
cash  payments  if  the  New  York  City  banks  in  1907  had  not  suddenly 
wired  all  banks,  city  and  country  alike,  that  'No  cash  will  be 
paid   on   balances  on  Monday  morning'?" 

"Are  panics  bom  in  the  country  or  in  the  city  where  great  pro- 
motions  flourish?" 

"Did  not  the  'cause'  in  New  York  produce  the  'effect"  through- 
out the  country  as  to  cash  that  'You  no  got  'em,  I  want  'em'?  The 
effect  simply  aggravated  the  cause." 

One  other   point    and    I  am>  through. 

Branch    Vs.    Independent   Banking. 

As  Canadian  branch  banking  is  so  often  landed  as  a  mode!  for 
us,  permit  a  brief  comparison   of  the   two  systems: 

1st  It  requires  a  capitalization  of  not  less  than  $500,000  to 
start  a  bank  in  Canada.  There  are  now  in  the  chief  cities  of  Can- 
ada twenty-seven  great  central  banks.  These  own  and  control  over  2,500 
branches  scattered  throughout  the  Dominion.  The  number  of  cen- 
tral banks  has  been  materially  reduced  in  the  past  thirty  years, 
and  it  ib  a  scandalous  fact,  widely  admitted,  that  the  powers  con- 
trolling make  it  about  as  difficult  to»  get  into  the  select  cotene  as 
to  get  into  a  safe  with  a  jimmie.  The  system,  evidently,  borders 
on  a  pure  monopoly. 


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K      .!?■    ,  t^^^^.  ^^   ^^^^^®    central    banks— no    stock    being    issued 

by    the    branches— IS    held    largely    in     I^ndon.     Liverpool.     Quebec 
Montreal,    Toronto     etc..    and    only    a    small    percentage    thrmi^hout 
dene      ™""^"'  course   dividends    follow    the    stockholders'    resi- 

3d.  I  understand  the  stock  is  assessed  where  the  holder  resides 
and  branches  pay  a  license  fee  to  do  business,  also  taxes  on  the 
buildings  o^yned  by  the  bank.  but  the  owner  of  such  buildings 
would   likewise    pay   the   tax,   if   rented    by   the   bank. 

4th.  The  branches  in  the  country  towns  and  smaller  cities 
have  no  president  or  cashier  and  no  board  of  directors,  but  are 
managed  practically  by  figureheads.  One  man  has  general  super- 
vision over  ten  to  twenty  branches  in  separate  localities  and "  the 
so-called  local  managers  take  orders  from  him. 

5th.     They  take  the  deposits  from  one  locality  and  send  to  others 
where    interest   rates   are   higher.     Canadian   banks,    I   am   informed 
have   niillions    of   dollars   invested    in    Mexican    and    South   American 
public  utilities,  to  the  detriment  of  home  demands. 

I^t  us  compare  conditions  in  .Muskogee  and  the  country  gen- 
erally, with  like  cities  in  Canada. 

Muskogee  has  eleven  banks  and  trust  companies  with  capital 
and  surplus  of  about  $1,500.000— the  bulk  of  which  is  owned  at 
home.  The  presidents,  cashiers  and  boards  of  directors  are  strong 
influentia  ,  public  spirited  citizens.  The  local  stockholders  aro  all 
on  the  alert  to  upbuild  Muskogee  and  bring  profits  on  their  ?tock 
holdings. 

Under  the  Canadian  branch  banking  system  the  Muskogee 
presidents  and  cashiers  would  be  set  aside  and  the  dirortors 
abolished.  There  would  be  comparatively  no  stockholders,  even 
ot  the  central  banks,  and  assistant  cashiers  would  be  the  mauiigers 
of  the  branches.  As  self-interest  is  the  first  law  of  nature  this 
wrecking  of  the  powerful  influence  for  good  of  all  these  elements 
would  breed  indifference. 

Again,  as  taxes  are  paid  in  Oklahoma  on  capital  and  surplus 
Muskogee  would  get  filched  out  of  over  $30,000  per  year  in  bank 
taxes.  If  the  stock  is  not  all  held  now  in  Muskogee,  it  soon  will 
be  under  your  thrifty  conditions;  then,  if  stockholders  get  but  6% 
per  annum  on  their  investment  of  $1,500,000,  that  would  mean  $90- 
000  less  per  annum  for  distribution  in  Muskogee,  plus  any  undivided 
profits,  all  of  which,  if  the  Canadian  system  were  adopted  in  the 
United  States,  would  go  to  100  or  200  great  central  banks  of  New 
^^l^k  Boston.  Philadelphia,  Chicago,  etc.,  which  would  have  the 
25,000  present  indei>endent  banks  as  tails  to  their  big  kites 
A  beautiful  and  enticing  picture  for  Muskogee  and  the  country  gen- 
erally. I  appeal  to  you,  gentlemen,  is  it  not  a  fact,  that  those  allied 
to  the  ownership  and  management  of  the  independent  banks  of  the 
country  have  been  wonderfully  instrumental  in  the  onward  and  up- 
ward progress  of  your  farm  sections,  your  hamlets  and  your  cities'^ 
If  we  upbuild  these,  do  we  not  upbuild  the  great  cities  and  the 
nation  as   a  whole? 

Contrast   these   facts    with   the    further   ones    that    Canada    with 
splendid  resources,  has  a  territory  about  equal  to  the  United  States 
with  a  population  of  but   seven  and  a   half  millions;    that  her  whole 
banking   power    is   not   equal   to   that  of    Massachusetts   alone-    that 
the   Monetary   Commission   reports   and   other  authorities   show  that 

8 


. 


n. 


\ 


the  comparative  losses  to  depositors  and  stockholders  of  Canadian 
banks,  as  compared  to  our  national  banking  system,  ig  as  three  to 
one  in  our  favor;  that  interest  rates  are  neither  uniform,  nor  are 
they  lower  than  in  the  United  States;  that  these  same  reports,  as 
testified  to  by  the  general  manager  of  the  Bank  of  Nova  Scotia, 
showed  comparatively  five  banks  failed  in  Canada  to  one  national 
bank  in  the  United  States  since  1880;  that  according  to  the  same 
general   manager — 

"In  1880  there  were  in  Canada 41  banks 

Incorporated    since    (to   1906) 7  banks 

Total 48  banks 

of  this  number  twelve  have  failed,  and  some  others  saved  them- 
selves by  amalgamation";  (To-day  but  twenty-seven  are  left);  that 
Canada,  notwithstanding  she  is  bolstered  up  with  ^reat  floods  of 
British  capital,  invested  in  her  railways,  banks,  etc..  yet  she 
is  practically  asleep  compared  to  the  wonderful  energj^  of 
our  people. — and  then  ask  yourselves  if  I  am  not  justified  in  declar- 
ing "the  Canadian  branch  banking  system  skims  the  cream  from 
the  country,  to  enrich  the  exchequers  of  the  monopolists  in  the 
great  cities,  while  the  Independent  banking  system  of  the  United 
States   helps  wonderfully  to   upbuild   the  nation   as  a  whole." 

In  an  address  at  Wausau,  Wis.,  last  March,  I  made  these  state- 
ments, merely  in  a  comparative  way,  and  it  seems  to  have  hit  the 
branch  bank  advocates  in  the  solar  plexus,  as  they  grew 
hysterical  over  it.  If  it  is  a  dead,  issue,  why  should  they  get  ex- 
cited?    The   country   better   nail   up  the  coffin  if   the   issue   is   dead. 

Perhaps  a  little  Canadian  testimony  will  not  detract  from  my 
contentions.  Therefore,  permit  a  short  quotation  from  a  1912  weekly 
edition  of  "The  Toronto  Star"  which  has  a  daily  circulation  largely 
in  excess  of  any  of  the  other  six  dailies  there. 

Preceding  a  well  written,  logical  four  column  article,  the  fol- 
lowing strong  headlines  appear  in  The  Star: 


0 


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=i; 


-■    r. 
t 

,  r. 


li 


N. 


4   ! 


"MONSTER  BANKING  MONOPOLY  A  LEECH  AT 

CANADA'S  THROAT,  KILLING  LOCAL 

INDUSTRY,  DEPOPULATING 

RURAL  DISTRICTS. 


"Centralization    of   Almost    Entire    Financial    Power    of    Dominion    In 

the    Hands   of  a    Few   Capitalists    Has    Resulted   from    Our 

Much-Vaunted     Banking    System.— Almost    Total 

Extermination    of   Local    Banks/' 


I  quote  but  two   extracts   therefrom,   to-wit: 

"While  large  capital  insures  slow,  steady  transmission  of  de- 
posits to  'branches'  for  control,  and  use  of  head  offices  Tn  s  rart 
alien  centers,  local  credit  based  on  local  savings  is  trLns?>^?ed 
to  parasites  on  whom  rests  neither  responsibility,  object  nor  de 
sire  to  exercise  banking  functions  in  support  of  ocal  enterprises 
With  such  credit  basis  lost,  not  only  does  the  collapse  ma&rp- 
t  on  ot  local  bank  institutions  become  inevitable,  but  local  asuira- 
tions  and  confidence  which,  had  sustained  local  industry  are  wiped 
out  or  made  dependent  on  the  will  and  nod  of  competitive  enfer- 
prise.  So  secretly,  so  gradually,  does  this  sequestration  of  savings 
proceed,  so  insidiously  are  local  enterprises  undermined,  that  planting 
ot  a  /branch'  to  suck  out  local  earnings,  to  extirpation  of  even  thi 
l?^  l?f^al  -industry  or  institution,  is  embraced  by  'slow  gofnT  pe(^ 
?  tin'Il"  ^^^  '^™^  ^'"^^'  innocence  as   a   three-years   child   fondled 

"To  this  accursed  system  of  concentration  of  credit  and  de- 
struction of  local  industry,  the  Dominion  of  Canada  stands  indebted 
f,^.^^''''"-/'^''^!^  population  of  7,000,000  in  place  of  25.000,000  right- 
tully  due  it  under  decentralized  systems  of  banks  designed  to  sustain 
to  breathe  the  breath  of  economic  life  through  the  remotest  as 
well  as  the  most  insulated  of  its  parts."  remotest,    as 

This  indictment  from  a  Canadian  rather  outstrips  mine. 
Permit  one  other  point  not  brought  out  heretofore. 

f  .t^  T^T^.^'^^'o^'*^  banking  functions   are   carried   on  in   the  banks 
of  the   United   States   at  least  as   well  as   in   Canada,-!  shoulfsay 

chanered'tanks' do  Tnl'   ^"^^   '"""  .^^  ^'^'  '''^'^'  ^"^    ^^^^^-^ 
Chartered    banks    do   not,— I    suppose    the  oft   repeated    assertion    as 

to  the  wonderful  elasticity  of  Canadian  bank  currency  ought  to  hi 
referred  to.  It  probably  is  not  generally  known  but  the  fac^  r^ 
TnllVll  Do^»™ent  No.  583  clearly  shows  tLt  a  hard  money 
market  obtained  in  Canada  in  1907.  The  Canadian  banks  with 
large  New  York  City  deposits  and  demand  loans  reduced  boih  and 
shipped  all  the  cash  they  could  get  to  Canada,  and  ^further  ag 
gravate   the   New   York  situation,   these   Canadian   banks     mns?erred 


!l 


•ft-^ 


large  amounts  of  their  New  York  balances  to  London.  Deposits  in 
Canada  declined  $30,000,000.  and  the  loans  $25,000,000.  in  the  last 
two  months  of  1907.  The  Dominion  suspended  the  limitation  on 
issues  of  currency  and  $5,115,000  of  "emergency  currency"  was  is- 
sued. I  cite  these  facts  to  show  that  slow-going  Canada  has  her 
troubles  too.  Even  if  her  currency  system  did  pull  her  thro  with- 
out cash  suspension  by  her  banks,  we  cannot  adopt  that  system 
without  adopting  her  branch  system  with  it.  For  proof,  Mr.  J.  B. 
Forgan,  who  is  an  ardent  advocate  of  the  Canadian  system,  in  1902 
declared  in  an  address  "To  me  the  simple  statement  that  about  10,- 
000  (now  double  that  number)  banks  with  capitals  running  all  the 
way  from  $25,000  to  $25,000,000  would  have  the  privilege  of  issue, 
settles  it  as  Impractical   and   impossible." 

Query — Do  we  wish  to  surrender  our  independent  system  and 
adopt  the  monopolistic,  "cream  skimming"  Canadian  system? 
Friends,  draw  your  own  conclusions.  I  refrain  from  wasting  any 
more  powder,  altho  there  is  abundance  left. 

As  a  constructive  policy  is  the  real  issue,  I  respectfully  close 
with  the  following: 

Condemning  the  best  banking  system  the  world  ever  knew,  with 
a  small  "mote"  in  it,  and  glorifying  the  monopolistic  branch  banking 
systems  of  other  nations  with  big  "beams"  in  them,  will  not  eradi- 
cate our  single  defect.  We  can  only  ameliorate  panic  conditions, 
but  not  through  a  big  bank  with  many  branches  which  will  enter 
into  severe  competition  with  existing  banks;  not  through  accept- 
ance privileges  to  7,400  national  banks  which  would  only  aggrga- 
vate  our  already  overstrained  credit;  not  by  additions  to  our  pres- 
ent inflated  currency.  These  simply  spell  monopoly,  inflation  of 
currency  and  credit.  They  are  panic  breeders  and  not  preventers. 
On  the  other  hand,  we  can  if  we  will  prevent  cash  suspensions  by 
banks  and  thereby  ameliorate  panic  conditions  through  either  of 
these   simple  methods. 

1  care  not  for  the  method,  if  results  are  obtained,  barring  objec- 
tions stated.  As  the  political  party  in  power  has  turned  down  the 
Monetary  Commission  Bill  I  respectfully  offer  under  first  a  new  sug- 
gestion for  earnest  consideration  and  then  mention  two  others  well 
understood. 

1st — Permit  the  banks  of  the  country  to  deposit  in  the  Treas- 
ury Department  at  Washington  or  other  depository  out  of  present 
reserves,  as  follows:  (estimated)  5%  of  deposits  from  the  three  central 
reserve  cities;  2%  of  deposits'  from  the  three  general  reserve  cities; 
1%  of  deiKJsits  from  the  country  banks.  This  would  mobilize  say 
$300,000,000  in  cash  now  held  as  reserve  and  therefore  would  oc- 
casion no  loss  to  any  bank.  In  ordinary  times  country  banks  can 
obtain  rediscounts  as  they  do  now — thro  their  city  correspondents. 
When  trouble  threatens  in  any  section,  this  vast  reservoir  of  ready 
cash  will  be  open  to  "discount  freely  to  all  solvent  parties"  at  high 
rates,  and  the  mere  knowledge  that  relief  can  be  had  will  impart 
general  confidence.  Its  operation  should  be  like  unto  a  water  res- 
ervoir, to  put  out  a  fire  in  its  incipiency  and  refill  again  ready 
for  future  troubles — not  a  money   maker.     A  servant,  not  a  master. 

2d — Extend  the  privileges  of  the  Aldrich-Vreeland  Act  to  all 
banks  on  a  uniform  form  of  currency.  There  are  1,200  millions  of 
dollars  of  bonds  now  in  the  banks  of  the  United  States,  eligible 
for  use  to  obtain  extra  cash  in  troublous  times,  and  the  Treasury 
department  holds  500  millions  of  national  bank  notes  for  this  purpose. 

11 


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b 


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3d— Legalize  clearing  house   certificates  on   which  extra  uniform 
currency   can   be   had   when   panic  threatens.  unitorm 

aic^^^^^w  ^^  ^^®^®  ^^"  ^"^®  °"^  s^^Sle  material  defect.  We  will 
h  rn  T^^'^T  ""''l  '?i^"^^^  independent  system  intact.  We  m^st 
turn  a  deaf  ear  to  the  siren  song  of  those  who  argue  so  loudly 
disease™  compound   remedies.        They  are   worse   than   the 

Brother  Bankers,  why  should  we  not  get  together  by  elimiMating 
y  ew'""  ani'^'.PH.^  compound  matters,  not  germane  to^he  end  "n 
trouble?  That  is  all  we  need,  as  banks  which  cannot  take  care 
who^'e^Th^Sln'a  rXn.""^^^  ^^^  """^^^^  '^  "^  ^^  ^«  '^" 
Waukesha,  Wis.,  May,  1913.  ^'''''''''^   '^"^   ^^^^^- 


QUERY 

It  is  a  maxim  that  currency  is  not  capital.  In  developing  days 
the  special  privilege  of  issuing  currency  by  banks  as  a  substitute 
for  capital  seemed  justifiable.  To-day  that  function  by  banks  gen- 
erally is  unjustifiable,  because  great  accumulations  of  surplus  capi- 
tal have  cut  interest  rates  to  less  than  one-half  of  those  of  fifty 
years  ago;  because  our  per  capita  circulation— mostly  gold  or  gold 
certificates-more  than  doubled  in  that  period,  and  because  our 
credit  is  over   expanded  now,   therefore, 

in^nfol^^''^    extends   its   loans    to    the    limit    of   its    assets    (total 

oans  are  now  over  nine  times  the  capital  of  all  banks)   then  swans 

Its  printed   I.  O    U.s  without  interest,  in  exchange  for  is  cuLSs 

spin  tizreiLzr""' '''''''''  ^"^  "^-^''^^'  ^-^  -^  ^^^^-t 

goverLr^on^  aT Sc'^Ll"^ n^?^   '^^  ^^  ^^^"^^^'   ''^^   ^^^   ^ 


I 


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^^^s^i!maD^S9mK9mmii 


%'I-L    ■>'       i»     ilOi 


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END  OF 
TITLE 


